PCCEF Pty Ltd v Geelong Football Club Ltd [No 3] [2019] VSCA 191

PRACTICE AND PROCEDURE - Application for leave to appeal in respect of costs - Application refused - Application for indemnity costs foreshadowed but not pursued -Costs on standard basis.

1 I have read in draft the judgment of McLeish and Emerton JJA. Save as to one matter, I agree with the costs orders they propose for the reasons which they give. These reasons assume knowledge of the matters set out in their joint judgment and I use the same abbreviations as they have used.

2 The matter upon which I disagree is the basis of taxation of PCCEF's costs in the Trial Division between 18 May 2017 and 14 June 2017. I would order costs in favour of PCCEF on the standard basis rather than on an indemnity basis.

3 As a practical matter, in the context of the litigation as a whole, the issue upon which I differ from the majority is minor, so I will state my reasons very briefly.

4 The basis upon which PCCEF seeks indemnity costs is an offer of compromise made in the name of Point Cook on 15 May 2017. PCCEF relies upon r 26.08 of the Rules.

5 Assuming, initially, that r 26.08 does apply, in my opinion this is a matter where the Court should 'otherwise' order. In my view, the fact that the entity named as plaintiff when the offer was made, Point Cook, was not the landlord and was deregistered means the Court should not order indemnity costs in this case. The purpose of the offer of compromise procedure is to bring about a resolution of the relevant dispute by the acceptance of an offer made in accordance with the Rules. The relevant offer here was made in the name of an entity not then in existence and which was not the relevant contracting party. Given the subsequent difficulty experienced in resolving that issue after the delivery of judgment, in my view it is by no means clear that acceptance of the offer would have brought the relevant dispute to an end. This problem was entirely of PCCEF's own making. In my opinion, special circumstances exist here which mean that an order for indemnity costs on the basis of the offer of compromise made in the name of Point Cook, not PCCEF, should not be made.

6 Further, I observe that it is not clear that r 26.08 does apply. On one view at least, the party who made the offer was Point Cook, which is not the party who, in due course, obtained the relevant judgment, being PCCEF. It is unnecessary to resolve that matter, which was also left unresolved in the substantive appeal, because, in my opinion, the Court should otherwise order even if r 26.08 does apply.

7 PCCEF Pty Ltd ('PCCEF') sought leave to appeal in two matters. The first concerned the construction of a lease ('construction appeal'). In that matter, leave was granted and the appeal was allowed.[1] The Court set aside the orders of the trial judge and made a declaration as to the construction of the lease in the terms sought by PCCEF. In the second matter, PCCEF was refused leave to appeal in respect of the trial judge's order awarding certain costs to the respondent, Geelong Football Club Ltd ('Geelong FC'), on an indemnity basis.[2]

8 Judgment was given in both proceedings on 26 June 2019. The solicitors appearing for the parties sought leave to file submissions in respect of costs. In the construction appeal, it was foreshadowed on behalf of PCCEF that indemnity costs would be sought on the basis of an offer of compromise. In the application for leave to appeal the costs order, the solicitor for Geelong FC indicated that it was possible that it would seek an order for indemnity costs in respect of the unsuccessful application. The Court made orders for the filing of short written submissions accordingly.

9 In the event, proposed consent orders were received in respect of the application for leave to appeal the costs order (matter S APCI 2018 0085). We will

therefore order in that matter that the applicant pay the respondent's costs of that application, to be taxed in default of agreement on the standard basis.

10 Submissions were filed as to the costs of the construction appeal.

11 It transpired that an offer of compromise was served in the proceeding in the Trial Division under O 26 of the Supreme Court (General Civil Procedure) Rules 2015 ('the Rules') on 15 May 2017. The trial took place on 30 May 2017. By that offer, 'the plaintiff', named as Point Cook Community Entertainment Facility Pty Ltd ('Point Cook'), offered to compromise its claim on the basis that Geelong FC give a written acknowledgement that, on a proper construction of the rent review provisions of the lease, the annual rental cannot reduce under any circumstances, that the plaintiff discontinue the proceeding and that there be no order as to costs. The offer was open to be accepted until 5 June 2017, by serving a notice of acceptance on the plaintiff. The offer was not accepted. We have not been provided with any correspondence that might have passed between the parties in that regard.

12 Curiously, the offer of compromise was accompanied by a letter from the plaintiff's solicitors which repeatedly named PCCEF as the plaintiff and did not refer to Point Cook at all. It seems that neither party identified the discrepancy at that stage. At all events, nothing was sought to be made of this fact in the submissions in this Court.

13 It had been discovered after judgment and the pronouncement of orders in the trial that the entity named as the plaintiff, Point Cook, was not the true landlord, having been deregistered in 2010. Eventually Point Cook was reinstated and orders were made substituting PCCEF as the plaintiff in December 2017.

14 PCCEF now seeks an order for its costs of the trial on the standard basis to 17 May 2017 and on an indemnity basis from 18 May 2017 until 14 June 2017 (that

14 being the date on which the orders were authenticated).[3] These were the costs that were dealt with by the trial judge as at the time of judgment. Costs subsequently incurred, as a result of the situation regarding Point Cook, were ordered to be paid by PCCEF on an indemnity basis (being the order for indemnity costs which was the subject of the second application for leave to appeal referred to earlier).

15 PCCEF also seeks its costs of the application for leave to appeal, and the appeal, on the standard basis. This is not opposed, except in relation to the costs of the costs application itself. We see no basis for carving out the latter costs, and the orders sought by PCCEF in respect of the appeal should be made.

16 It is not in issue that Geelong FC should pay PCCEF's costs of the trial. The remaining issue is the basis upon which those costs should be assessed.

17 It is also not in issue that the offer of compromise was an offer of compromise made by a plaintiff within the terms of O 26. The costs consequences of a failure to accept an offer of compromise are set out in r 26.08, relevantly as follows:

(1) This Rule applies to an offer of compromise which has not been accepted at the time of verdict or judgment.

(2) Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled -

(a) if the claim of the plaintiff is for damages for or arising out of death or bodily injury, to an order against the defendant for the plaintiff's costs in respect of the claim taxed on an indemnity basis;

(b) in the case of any other claim of the plaintiff, to an order against the defendant for the plaintiff's costs in respect of the claim before 11.00 a.m. on the second business day after the offer was served, taxed on the ordinarily applicable basis and for the plaintiff's costs thereafter taxed on an indemnity basis.

(8) Where the plaintiff obtains judgment for the recovery of a debt or damages, and the amount of the debt or the damages was not in dispute, but only the question of liability, paragraph (2) shall not apply unless the Court is satisfied that the plaintiff's offer was of a genuine compromise.

18 PCCEF submitted that, the judgment not being one for the recovery of a debt or damages, r 26.08(8) does not apply. Accordingly, the only determinant of whether r 26.08(2) is engaged was said to be whether or not PCCEF had obtained judgment on terms no less favourable than the offer. It was submitted that the Court's declaration was in substance the same as the acknowledgement sought in the offer, and the offer as to costs was more generous than the ultimate result will be in that regard.

19 PCCEF therefore submitted that r 26.08(2) was engaged and the onus lay on Geelong FC to persuade the Court that it should 'otherwise order'. That was said to be a heavy onus, on the basis of observations made by Ashley J in Simonovski v Bendigo Bank Ltd [No 2],[4] which were cited with approval by this Court in Gamboni v Bendigo and Adelaide Bank Ltd [No 2].[5]

20 Geelong FC accepted that the onus rested upon it to establish special circumstances justifying a departure from the prima facie rule, citing Re Saric; Saric v Vukasovic [No 2][6] and Simply Irresistible Pty Ltd v Couper [No 2].[7] It submitted that those circumstances existed by reason of the fact that the offer had been served by Point Cook and not by PCCEF. It was noted that PCCEF was not a 'party' and therefore could not have served the offer of compromise under r 26.02. Moreover, the written acknowledgement sought in the offer would have been given to Point Cook, rather than to PCCEF.

21 Geelong FC submitted that, during the period when the offer was open for acceptance, Point Cook had not been reinstated and was therefore incapable of making or being bound by an offer of compromise. The offer could not be accepted by Geelong FC because this required service of a notice of acceptance on a non-existent entity. It was noted that this Court had, in its judgment in the costs application, regarded the question whether the proceeding was a nullity as a difficult and complex one, which did not resolve until Point Cook was reinstated.[8] Geelong FC accepted that it had not been aware that Point Cook had been deregistered at the time of the offer, but pointed to this Court's finding that the situation was of PCCEF's own making.[9]

22 Finally, Geelong FC submitted that non-acceptance of the offer was not unreasonable, in circumstances where the offer was said to be premised on the incorrect contention that Geelong FC's construction was unarguable and a further contention that various lay persons associated with Geelong FC had previously considered the plaintiff's construction to be correct, which view Geelong FC no longer shared.

23 The party seeking to displace the prima facie rule in r 26.08 bears the onus.[10] The onus is not readily discharged. In Gamboni, Tate JA and Kyrou AJA stated:

In Simonovski, Ashley J stated that while the Court retains a discretion under r 26.08(2)(b) of the ... Rules, an 'order otherwise' should not be lightly made, and that the prima facie position established by the rule 'is a strong one, not easily displaced'.[11]

24 In Saric, McMillan J referred to the language used in the authorities to describe the kinds of case where the prima facie rule has been displaced:

The Court must exercise caution in departing from the prima face rule and only do so in cases that warrant such a departure, invariably expressed in terms such as 'compelling and exceptional circumstances', 'for proper reasons which, in general, only arise in an exceptional case' and 'special circumstances'.[12]

25 Whether the Court will 'otherwise order' depends on whether doing so advances the purpose of O 26.[13] That purpose, broadly speaking, is to encourage the compromise of litigation and the saving of the private and public costs associated with it.[14] The reasonableness of the rejection or non-acceptance of an offer is one matter that may be taken into account, but is not of itself determinative.[15]

26 It is clear that r 26.08(2) is engaged in the present case. An offer of compromise was made by the plaintiff. Judgment has been obtained on terms that are no less favourable to the plaintiff than the terms of the offer. It is not necessary to consider whether a comparison of the costs disposition proposed in the offer and the now likely disposition as to costs after trial suffices to meet that test, because it is plain in this case that the substantive relief the plaintiff has obtained is no less favourable to it than the acknowledgement would have been.

27 We do not accept the argument that the offer was not capable of being made or accepted due to Point Cook's deregistration. When the offer was made, Point Cook was the named plaintiff. Its deregistration was cured upon its subsequent reinstatement, which operated with retrospective effect by virtue of s 601AH(5) of the Corporations Act 2001 (Cth). That provision relevantly provides that if a company is reinstated, it is taken to have continued in existence as if it had not been deregistered. In other words, the position was regularised and, albeit after the time for acceptance of the offer had passed, it was confirmed that the offer was made by Point Cook as the plaintiff - as it stated on its face. Similarly, had the offer been accepted, Point Cook would have received notice of that acceptance and would have received the acknowledgement sought from Geelong FC. Upon Point Cook's reinstatement these things would have been taken to have been done as if Point Cook had not been deregistered. Indeed, reinstatement could have been sought for that very purpose. Point Cook would then have been bound to discontinue the proceeding, if it had not already done so.

28 Geelong FC correctly points to a possible anomaly, in that, in the scenario just mentioned, the acknowledgement sought in the offer would have been given to Point Cook, rather than the true landlord PCCEF. That anomaly would not have been cured either by reinstatement or by any subsequent order substituting PCCEF as plaintiff (assuming this still happened pending the proceeding being discontinued pursuant to the accepted offer). But even if the acknowledgement were to be worthless to PCCEF (which we need not decide), that was still the price which Point Cook named for discontinuing the proceeding. If it was of no value, and the offer was accepted, that misfortune lay at the feet of Point Cook (and PCCEF). But that does not constitute special circumstances why r 26.08(2) should not have its ordinary operation. The offer could still have been accepted.

29 In our view, there are no special circumstances that would warrant this Court 'otherwise ordering' under r 26.08(2). In short, Geelong FC has advanced no reason for 'otherwise ordering' that would advance the purpose of O 26. It knew nothing of the error that led to Point Cook, rather than PCCEF, conducting the proceeding. It simply chose not to accept the offer. Had it accepted the offer, Point Cook could still have been reinstated and would have been bound by the acceptance of its offer to discontinue the proceeding (if it had not already done so). Instead, Geelong FC proceeded with the litigation and knowingly took the risk as to indemnity costs which the offer entailed. The ordinary course provided for under the Rules should follow.

30 In the application for leave to appeal (matter S APCI 2018 0085), it will be ordered that the applicant pay the respondent's costs of and incidental to the application, to be taxed in default of agreement on the standard basis.

31 In the appeal (matter S APCI 2017 0128), it will be ordered that the respondent pay the appellant's costs of the application for leave to appeal, and the appeal, on the standard basis. As well as the orders already made in place of those of the trial judge, it will be ordered that the defendant pay the plaintiff's costs of the proceeding, to be taxed in default of agreement on the standard basis in respect of costs incurred up to and including 17 May 2017 and on an indemnity basis in respect of costs incurred from 18 May 2017 up to and including 14 June 2017.

[1] [2019] VSCA 144.

[2] [2019] VSCA 148 ('Costs Reasons').

[3] Point Cook Community Entertainment Facility Pty Ltd v Geelong Football Club Ltd [2017] VSC 313 (Croft J).

[4] [2003] VSC 139 [17] ('Simonovski').

[5] [2013] VSCA 282 [51] ('Gamboni') (Tate JA and Kyrou AJA).

[6] [2018] VSC 254 [16] ('Saric') (McMillan J).

[7] [2011] VSC 33 (Kyrou J).

[10] See, eg, Saric [2018] VSC 254 [17] (McMillan J).

[11] [2013] VSCA 282 [51] (citations omitted).

[12] [2018] VSC 254 [16] (citations omitted).

[13] Stevens v Spotless Management Services Pty Ltd [No 2] [2016] VSCA 311 [19] ('Stevens') (Kyrou and McLeish JJA and Elliott AJA), citing Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154, 164-5 (Hayne JA).

[14] See Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154, 164 (Hayne JA).

[15] Stevens [2016] VSCA 311 [26], citing Nakos v Serdaris [2016] VSC 179 [39], [42] (Zammit J) and Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 [11] (Tamberlin, Finn and Sundberg JJ).